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Market Conditions Relative To Effective Date

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ZZGAMAZZ

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Senior Member
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Jul 23, 2007
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Certified Residential Appraiser
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California
Hypothetically speaking, can the market be described as "stable" rather than "declining" if the result of the appraiser's market analysis reveals that it has stablized--but at a point considerably less than market value as of the effective date?

For example, for various reasons I feel that the local sub-market in which my subject property exists is stable at approximately 15% below market value, which is based upon a plethora of sold comparables within, say, 30 days of the effective date.

The current active market is substantially below "today's" effective date, with huge support from pending sales.

In this scenario I feel confident that the market is stable, yet at a price point below market value.

Question: Can this snapshot be described as "stable" if the circumstances and rationale are explained; or so should stable pertain only to stable at current market value as of the effective date?
 

stefan olafson

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Apr 2, 2003
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North Dakota
Sure, if it's well supported by the data you describe.
 

Marcia Langley

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Professional Status
Certified Residential Appraiser
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Missouri
The current active market is substantially below "today's" effective date, with huge support from pending sales.

ZZ,

This line of thinking makes me itchy.:rof:

If your active market is 15% below your closed sale indicators then those pending sales must be taken into account in your opinion of value as of the effective date.

I understand that pending sales can be below closed sales. What I don't understand is how pending sales can be below market value.

And more, If your contemorary closed sales are higher than your contemporary pending sales I don't see how you can call that stable. The movement is contemporary to your effective date.
 

Marcia Langley

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Professional Status
Certified Residential Appraiser
State
Missouri
Also, I don't see how you could say that the decline has stablized. If all of the pending sales are consistently priced, that consistentcy is not an indicator that stabilization has occured. If they consistently dropped in the last thirty days why would you think there was no chance they may do that again in the next 30 days?
 

ZZGAMAZZ

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Certified Residential Appraiser
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California
HMMMMMM...

if the volume of pending sales--which is extremely large relative to markets 10/07 - 02/08--supports the current active market, it would appear to provide support to the 'price-point' being established by the current active market.

the current active market is 10% or so below the effective date, earlier this week, which is based upon market exposure going backwards in time and leading up to the effective date.

consequently, stability has been reached based upon equilibrium between supply and demand, as evidenced by the market response to the current active market.

I suppose it could be said--and probably that's what you're telling me-- that if this is indeed true, then current market value is based upon the market established by the relationship between the actives and the pending sales, rather than what I'm defining as market value based upon exposure (which is a suspect concept in my newbee opinion).

this line of reasoning might wind back to the numerous current threads that pertain to the application of non-sales in the SC grid; and it might also lead one to interpet market reaction in the form of pending sales to opine that the market is "increasing" because the large volume of pending sales presages competition among buyers that will force prices up...

p.s. I'm really not trying to be a smart-axx and sincerely wish to be able to figure this out.
 
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Randolph Kinney

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Apr 7, 2005
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Retired Appraiser
State
North Carolina
HMMMMMM...

if the volume of pending sales--which is extremely large relative to markets 10/07 - 02/08--supports the current active market, it would appear to provide support to the 'price-point' being established by the current active market.

the current active market is 10% or so below the effective date, earlier this week, which is based upon market exposure going backwards in time and leading up to the effective date.
Active listings define the upper price point. It does not mean the price of a future sale can't go lower. Pendings sales are just that; you don't know what the price will be when they close.

If your comparable closed sales are taken when the market represented a 10% higher value than today's pendings and listings, then you still have a declining market.
 

Marcia Langley

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Aug 26, 2005
Professional Status
Certified Residential Appraiser
State
Missouri
I suppose it could be said--and probably that's what you're telling me-- that if this is indeed true, then current market value is based upon the market established by the relationship between the actives and the pending sales, rather than what I'm defining as market value based upon exposure (which is a concept with that of suspect pertince in my newbee opinion).

ZZ,

I do think this is the crux of it.

Sometimes it aids communications if we agree on some terminology.

Market value as of an effictive date is analyzed by taking all of the various trend indicators into consideration.

Some trend indicators that must be analyzed are:

sales volume, trended
days on market, trended
months of supply on hand, trended

closed sale prices, trended (that have already had an exposure period)
pending sale prices (that have already had an exposure period)
active listing prices (that have already had some exposure)

All of these indicators are reconciled together to arrive at an opinion of market value. All of them have occurred prior to or contempraneous with the effective date.

Does this help clarify my meaning for you?

---

You have heard some say that the active and pending listings provide a cap on the market value. In a rapidly declining market I couldn't disagree with that.
 
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ZZGAMAZZ

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Jul 23, 2007
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Certified Residential Appraiser
State
California
I appreciate that clarification. I'm trying to be on the cutting edge of the analysis based upon my expertise as an expert in the local market; and I don't want to be among the legions who will describe a market as "increasing" only after the horse has left the barn.
 

Marcia Langley

Senior Member
Joined
Aug 26, 2005
Professional Status
Certified Residential Appraiser
State
Missouri
ZZ,

I can appreciate that.

It's the transitional periods that are the hardest to analyze. The beginning stages of a change in direction or speed is usually marked by wild variations in prices as opposed to consistency. Unfortunately those wild variations could either indicate a further worsening of the current trend or a reversal getting ready to happen.

Some of my most angst filled moments were when my market began to reverse trend. The data was all over the place.
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
Hypothetically speaking, can the market be described as "stable" rather than "declining" if the result of the appraiser's market analysis reveals that it has stablized--but at a point considerably less than market value as of the effective date?

For example, for various reasons I feel that the local sub-market in which my subject property exists is stable at approximately 15% below market value, which is based upon a plethora of sold comparables within, say, 30 days of the effective date.

The current active market is substantially below "today's" effective date, with huge support from pending sales.

In this scenario I feel confident that the market is stable, yet at a price point below market value.

Question: Can this snapshot be described as "stable" if the circumstances and rationale are explained; or so should stable pertain only to stable at current market value as of the effective date?

Do you see any contradictory statements in your post?
 
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